Line 5 – a Long-Term Asset? Not a Chance in this Century

Photo credit: Nancy May

By Liz Kirkwood and Skip Pruss

Substitute Bill SB 1197 continues to be riddled with faulty assumptions and logic that favor and bend towards Enbridge’s private corporate shareholder interests. Most glaring of all is the audacious and misguided underlying assertion that we humans will continue to rely on a fossil fuel based economy over the next 99 years (the length of the proposed tunnel lease agreement between Enbridge and the State of Michigan).

The proposed tunnel agreement apparently is supposed to create “a mechanism to ensure that a utility tunnel is built with sufficient technical specifications and is maintained properly to ensure a long asset life and secondary containment for any leak or pollution from utilities using the tunnel.” 14(D)(4)(D). 

Given accelerating trends in fossil fuel divestment, finance and asset management, and the electrification of transportation, continued investment in fossil fuel infrastructure is a risky proposition and completely at odds with the urgent and universally recognized need to reduce GHG emissions.

Accordingly, there is no realistic “mechanism” that Enbridge and the State of Michigan can craft to “ensure a long asset life” for Enbridge’s Line 5 pipeline tunnel wish.

FLOW’s chair, Skip Pruss, documents the fundamental energy shift we are seeing right before our eyes and explains why we must not invest in multi-billion fossil fuel infrastructure assets like a new Line 5 pipeline tunnel under our Great Lakes. In fact, Skip points out that even the world’s leading oil producers are abandoning the tar sands investments that drive Enbridge’s Canadian oil transport roadmap into North America and the Great Lakes.

Finance/Asset management – Asset managers are under increasing pressure to divest fossil fuel holdings.  As of 2018, nearly 1000 institutions have pledge to divest $6.24 trillion in fossil fuel assets. Examples include the Norwegian Sovereign Wealth Fund ($910 billion), the Rockefeller Family Fund and the California Public Employees Retirement System fund ($292 billion).  Over 120 universities and colleges have committed to fully or partially divest their holdings in fossil fuel companies.

Investment trends – Global investment in renewable energy exceeded $333 billion in 2017 while investment in fossil fuels and nuclear energy totaled $144 billion.  At the same time,

• A recent WSJ analysis indicates shale oil and gas sector has lost $280 billion since 2007.
• Seven international oil companies – Exxon Mobil, Conoco Phillips, Statoil, Koch Industries, Marathon, Imperial Oil and Royal Dutch Shell – will not need Enbridge’s future pipeline services as they have announced that they are writing off tar sand assets in Alberta.
• New Zealand and Ireland  have recently announced there intentions to decarbonize their economies.
• Xcel Energy, electricity provider to eight states, announced that it will end the use of fossil fuels decarbonize its entire electric generation capacity.

Electrification of transportation– Recent petroleum sector forecasts by firms specializing in energy trends like Bloomberg, Navigant, and Goldman Sachs, predict that the transition to electric vehicles will accelerate quickly with a corresponding, precipitous drop in the demand for transportation fuels. 

• The world’s major auto manufacturers are validating these predictions. General Motors, VW, Volvo, and others are making clear that petroleum-free electric drivetrains will dominate their future manufacturing investments and that future product offerings will not use transportation fuels.  VW alone, intends to invest $84 billion in transitioning to electric vehicles.
• Oil demand is dropping faster than anticipated due to the electrification of transportation.
• England, France, Israel, Norway, Netherlands, Slovenia, India, Egypt, and China have announced their intentions to ban future sales and, in some cases, the use of vehicles with internal combustion engines. Ireland has gone even further, announcing that it will divest its sovereign interest in all oil, gas and coal.

Liz Kirkwood, Executive Director

Climate change has also increased actuarial uncertainties. The increasing frequency and severity of storm events necessitates recalibration of analytical models predicting impacts and losses.  Insurance industry regulators are imposing more rigorous disclosure requirements and improved assessment and management of investment portfolios to mitigate risk. Moody’s Investors Service, announced recently that it would give more weight to climate change risks in evaluating the creditworthiness of state and local governments.

Skip Pruss, FLOW Chair

In sum, the facts simply don’t add up to justify the State of Michigan investing with Enbridge to construct a pipeline tunnel for the next 99 years. At this time in history, we must pivot and focus on solving complex systemic anthropogenic climate change impacts, rather than further contributing to it.  Let’s encourage our Michigan leaders to put the interests of the Great Lakes and its people and tribes first by planning for our energy transition and inevitable future.